Bogle says 50-50 short/intermediate bonds

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McGilicutty
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Bogle says 50-50 short/intermediate bonds

Post by McGilicutty » Thu Jan 12, 2017 11:30 am

Jack Bogle was on CNBC today. He said that his bond allocation was about fifty-fifty short-term to intermediate term because long-term bond prices are just too volatile for him. I didn't hear him mention what his bond-to-equity allocation was.

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Re: Bogle says 50-50 short/intermediate bonds

Post by nisiprius » Thu Jan 12, 2017 12:12 pm

Was it clear from context that this was a recommendation for other investors, or was he just saying "this is what I do?"
Last edited by nisiprius on Thu Jan 12, 2017 12:24 pm, edited 2 times in total.
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Re: Bogle says 50-50 short/intermediate bonds

Post by McGilicutty » Thu Jan 12, 2017 12:22 pm

nisiprius wrote:Was it clear from context that this was a recommendation for other investors, or was he just saying "this is what I do?"
He was just saying "this is what I do."

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Re: Bogle says 50-50 short/intermediate bonds

Post by Rodc » Thu Jan 12, 2017 12:48 pm

Why not just go 100% semi-short? :)
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Re: Bogle says 50-50 short/intermediate bonds

Post by TheTimeLord » Thu Jan 12, 2017 12:49 pm

nisiprius wrote:Was it clear from context that this was a recommendation for other investors, or was he just saying "this is what I do?"
What he would do because rates are too volatile.
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Re: Bogle says 50-50 short/intermediate bonds

Post by patrick013 » Thu Jan 12, 2017 1:00 pm

Well he's not buying -
Vanguard Long-Term Bond ETF (BLV)
Vanguard Long-Term Corporate Bond ETF (VCLT)

My fav but no TRSY's in it -
Vanguard Intermediate-Term Investment Grade Bonds (VFIDX)
age in bonds, buy-and-hold, 10 year business cycle

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Re: Bogle says 50-50 short/intermediate bonds

Post by saltycaper » Thu Jan 12, 2017 1:29 pm

patrick013 wrote:
My fav but no TRSY's in it -
Vanguard Intermediate-Term Investment Grade Bonds (VFIDX)
Sure there are. About 10% Treasury/Agency. Many top holdings are Treasurys. I don't know if it has been or always will be so, but Vanguard's active investment-grade bond fund series has included a small percentage of Treasurys for some time.
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Re: Bogle says 50-50 short/intermediate bonds

Post by lack_ey » Thu Jan 12, 2017 1:33 pm

saltycaper wrote:
patrick013 wrote:
My fav but no TRSY's in it -
Vanguard Intermediate-Term Investment Grade Bonds (VFIDX)
Sure there are. About 10% Treasury/Agency. Many top holdings are Treasurys. I don't know if it has been or always will be so, but Vanguard's active investment-grade bond fund series has included a small percentage of Treasurys for some time.
Which is notably part of the reason why there's no purchase fee on this fund but there are on the intermediate-term and long-term corporate bond index funds.

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Re: Bogle says 50-50 short/intermediate bonds

Post by patrick013 » Thu Jan 12, 2017 2:14 pm

Sorry, my mistake.
age in bonds, buy-and-hold, 10 year business cycle

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Re: Bogle says 50-50 short/intermediate bonds

Post by Index Fan » Thu Jan 12, 2017 3:36 pm

I'm not John Bogle so I'll stick with Total Bond Market Index with some TIPS on the side.
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Re: Bogle says 50-50 short/intermediate bonds

Post by galeno » Thu Jan 12, 2017 5:06 pm

If things go well in the USA the FED will probably raise interest rates 25 bp three times during 2017.

Our FI (55% bonds + 5% cash) allocation's duration = 5.5 yr. Should we shorten it to 4.0 yr by holding 40% bonds + 20% cash?
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

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Re: Bogle says 50-50 short/intermediate bonds

Post by pascalwager » Thu Jan 12, 2017 6:13 pm

galeno wrote:If things go well in the USA the FED will probably raise interest rates 25 bp three times during 2017.

Our FI (55% bonds + 5% cash) allocation's duration = 5.5 yr. Should we shorten it to 4.0 yr by holding 40% bonds + 20% cash?
As a retiree, I've been using ~4 years bonds duration for some time now, as per Larry Swedroe. He considers it a compromise between inflation and reinvestment risks. I use VG short and intermediate Treasury funds, 50/50.

Also influenced by Bogle's 50/50 and fund manager Pleshka's DFA 5-Year Global Fixed Income Fund (3.62 years). I actually tend to follow the latter's duration and adjust my VG bonds accordingly, from time-to-time.

But I also have a very large slug of cash (W. Bernstein), so overall duration is 1.1 years.

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Re: Bogle says 50-50 short/intermediate bonds

Post by galeno » Thu Jan 12, 2017 6:33 pm

@pascalwager

That' a very large slug of cash. Why so much?
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

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Re: Bogle says 50-50 short/intermediate bonds

Post by Munir » Thu Jan 12, 2017 10:04 pm

How can one watch the whole interview or read a transcript without becoming a "member" of CNBC? All I get pn the web site is a short clip of the interview dealing with Trump when I want to hear/see what Bogle says about bonds.

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Re: Bogle says 50-50 short/intermediate bonds

Post by nedsaid » Thu Jan 12, 2017 10:09 pm

McGilicutty wrote:Jack Bogle was on CNBC today. He said that his bond allocation was about fifty-fifty short-term to intermediate term because long-term bond prices are just too volatile for him. I didn't hear him mention what his bond-to-equity allocation was.
Oh no!!! You know what this means. If people follow Bogle and put a lot of their fixed income money into short term bond funds, it almost guarantees that interest rates will stay low!! ;o) Sort of like the "Nedsaid effect." People will be better off if they just stayed in Intermediate Term bonds and reinvested the dividends.

Also this might be another "Nedsaid Contrary Market Indicator." If everyone thinks rates are going higher, it might mean that rates won't budge. Oh man!! Don't do this Mr. Bogle!! If you just don't say anything, maybe interest rates will go up on their own.
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Re: Bogle says 50-50 short/intermediate bonds

Post by nedsaid » Thu Jan 12, 2017 10:20 pm

Okay, okay! Time to fight fire with fire. Nedsaid hereby recommends that everyone put 100% of your bond holdings into the longest duration treasury bond fund that you can find. Maybe we can get those interest rates to rise after all. :wink: :wink: :wink:

(I am joking by the way). I would like to see interest rates gradually rise so that I can put more of my portfolio into bonds. I still have 2/3 of my retirement portfolio in stocks. Rates have been so low that I don't want to own any more bonds than I absolutely have to. Hard to get excited about 2.5% returns. I would like to see the US Treasury 10 year bond get to 4% and gradually enough that it doesn't hurt stocks or at least not hurt them very much. It is also a way of saying that I want to see a stronger economy.
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Re: Bogle says 50-50 short/intermediate bonds

Post by MickeyBoy » Thu Jan 12, 2017 10:30 pm

I'm a bit confused.

Bond funds that have lost value owing to a higher interest rate will still generate the same returns as before. The only losses I see - perhaps I am missing something? - is if I sell the bonds, i.e. generating a loss in the principal. Newer bonds will have a higher interest rate, so in a sense I have lost in that to get that rate I have to sell older bonds at a loss.

But apart for RMDs and current expenses, which we could prepare for with ST bonds, what is the problem with the remaining bond holdings? If their duration is about 4-6 years, the situation should right itself fairly quickly. I believe Morningstar says that the interval required to regain stability is shorter than the amount of time predicted by duration.

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Re: Bogle says 50-50 short/intermediate bonds

Post by abuss368 » Thu Jan 12, 2017 10:58 pm

Jack Bogle's has often noted that he allocates his bond portfolio between both short and intermediate term bonds. He used to mention that he invest in Limited and Intermediate Term Tax Exempt in his taxable account. His tax advantage account included Total Bond and I believe Short Term Bond Index.

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Re: Bogle says 50-50 short/intermediate bonds

Post by abuss368 » Thu Jan 12, 2017 11:00 pm

I also recall many years ago Jack Bogle, in an interview with Steve Forbes, noted that he no longer invested in the TIPS fund. At that time he mentioned it was because of the low yield. During that interview, the yield was much higher than today.
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Re: Bogle says 50-50 short/intermediate bonds

Post by boglesmind » Thu Jan 12, 2017 11:07 pm

A friend nearing retirement has the following bond allocation in his taxable acct (28% Federal and 10% CA marginal tax )

25% vanguard CA long term tax-exempt admiral (VCLAX)
25% vanguard CA intermediate term tax-exempt admiral (VCADX)
50% Vanguard Short-Term Tax-Exempt Fund Admiral (VWSUX)

Rest of his portfolio (60%) is total stock or S&P500 index funds in retirement accts (401K). I showed him this thread and he wants to know if this is a good allocation. After retirement he expects to be in 25% Federal tax bracket (due to rental income) until SS starts. He'd like to know if this is a good bond allocation. Comments?

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Re: Bogle says 50-50 short/intermediate bonds

Post by abuss368 » Thu Jan 12, 2017 11:18 pm

boglesmind wrote:A friend nearing retirement has the following bond allocation in his taxable acct (28% Federal and 10% CA marginal tax )

25% vanguard CA long term tax-exempt admiral (VCLAX)
25% vanguard CA intermediate term tax-exempt admiral (VCADX)
50% Vanguard Short-Term Tax-Exempt Fund Admiral (VWSUX)

Rest of his portfolio (60%) is total stock or S&P500 index funds in retirement accts (401K). I showed him this thread and he wants to know if this is a good allocation. After retirement he expects to be in 25% Federal tax bracket (due to rental income) until SS starts. He'd like to know if this is a good bond allocation. Comments?

Boglesmind
I would consider starting a new thread as you may receive more responses. To your question however, why not consider 1/2 California and 1/2 Intermediate Term Tax Exempt. Another alternative is 100% Intermediate Term Tax Exempt. The national fund provides a lot of diversification.
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Re: Bogle says 50-50 short/intermediate bonds

Post by Munir » Thu Jan 12, 2017 11:31 pm

MickeyBoy wrote:I'm a bit confused.

Bond funds that have lost value owing to a higher interest rate will still generate the same returns as before. The only losses I see - perhaps I am missing something? - is if I sell the bonds, i.e. generating a loss in the principal. Newer bonds will have a higher interest rate, so in a sense I have lost in that to get that rate I have to sell older bonds at a loss.

But apart for RMDs and current expenses, which we could prepare for with ST bonds, what is the problem with the remaining bond holdings? If their duration is about 4-6 years, the situation should right itself fairly quickly. I believe Morningstar says that the interval required to regain stability is shorter than the amount of time predicted by duration.
Isn't the problem really with repeated increase of rates over 2-3 years which necessitate starting the 4-6 year duration period after each new increase in rates?

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Re: Bogle says 50-50 short/intermediate bonds

Post by pascalwager » Fri Jan 13, 2017 3:24 am

galeno wrote:@pascalwager

That' a very large slug of cash. Why so much?
galeno,

Yes, I'm about 80/5/15, stocks/bonds/cash. I'm not much of a bonds guy and naturally gravitate towards a portfolio that's comprised of equity risk and ultra short-term risk (T-Bills, savings, I-Bonds). Because T-Bill rates are low, I mainly use a 1.05% savings account. If rates rise, I could go heavy into Treasuries. For most of my life, starting at age 14, I was 100% T-Bills.

Municipal and corporate bonds aren't even in my field of consciousness, so I don't like any of the Vanguard bond funds; but I do acknowledge the low fees compared to other fund companies.

I do make an exception for the DFA variable maturity bond funds designed by Gene Fama. IFA uses four of these funds for an overall duration of about two years. Two are global and the corporate bonds don't have call risk. I have a small amount in the DFA 5-Year global fund.

For me, cash provides a sense of security. For others it might provide a sense of inflation risk, or missed opportunity. Other investors may actually need to stretch for bonds yield, but I do not.

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Re: Bogle says 50-50 short/intermediate bonds

Post by galeno » Fri Jan 13, 2017 4:46 am

If I were at 80% equities I would not bother with bonds.
AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

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Re: Bogle says 50-50 short/intermediate bonds

Post by stemikger » Fri Jan 13, 2017 4:52 am

I just stick with the Total Bond Market Index and hope for the best. So far it has done what it is supposed to do for me. Also, Vanguard still has faith in this fund because it is used in all their Target Date Funds, Lifestyle Funds and the Balanced Index mimics it.

John Bogle has often said the average person will do just fine with one fund which is the Vanguard Balanced Index Fund. Every year he puts money for his Grandchildren in this fund. If it's good enough for them, it's good enough for me.

One last thing, John Bogle has a net worth of $80 million. At this point he could put his money under his mattress. Most of us can not, or at least I can't. lol

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Re: Bogle says 50-50 short/intermediate bonds

Post by Quark » Fri Jan 13, 2017 5:46 am

galeno wrote:If things go well in the USA the FED will probably raise interest rates 25 bp three times during 2017.

Our FI (55% bonds + 5% cash) allocation's duration = 5.5 yr. Should we shorten it to 4.0 yr by holding 40% bonds + 20% cash?
Market prices and yields have already adjusted to the possibility of Fed rate increases, as well as other known factors affecting bonds. I wouldn't adjust based on this sort of economic news.

Whether 4.0 or 5.5 year duration is appropriate for you depends on your circumstances, including overall portfolio and horizon.

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Re: Bogle says 50-50 short/intermediate bonds

Post by Quark » Fri Jan 13, 2017 5:53 am

Munir wrote:
MickeyBoy wrote:I'm a bit confused.

Bond funds that have lost value owing to a higher interest rate will still generate the same returns as before. The only losses I see - perhaps I am missing something? - is if I sell the bonds, i.e. generating a loss in the principal. Newer bonds will have a higher interest rate, so in a sense I have lost in that to get that rate I have to sell older bonds at a loss.

But apart for RMDs and current expenses, which we could prepare for with ST bonds, what is the problem with the remaining bond holdings? If their duration is about 4-6 years, the situation should right itself fairly quickly. I believe Morningstar says that the interval required to regain stability is shorter than the amount of time predicted by duration.
Isn't the problem really with repeated increase of rates over 2-3 years which necessitate starting the 4-6 year duration period after each new increase in rates?
It depends on when you'd start selling bonds and how much additional interest you'd earn before then.

If you're holding long-term, then interest rate increases are a good thing for return, despite one or more episodes of short-term decreases in value.

Thursday, December 15 the 10-year treasury was at 2.6% It's now at 2.35%. Are rates headed up or down?
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Re: Bogle says 50-50 short/intermediate bonds

Post by Portfolio7 » Fri Jan 13, 2017 8:16 am

pascalwager wrote:
galeno wrote:@pascalwager

That' a very large slug of cash. Why so much?
galeno,

Yes, I'm about 80/5/15, stocks/bonds/cash. I'm not much of a bonds guy and naturally gravitate towards a portfolio that's comprised of equity risk and ultra short-term risk (T-Bills, savings, I-Bonds). Because T-Bill rates are low, I mainly use a 1.05% savings account. If rates rise, I could go heavy into Treasuries. For most of my life, starting at age 14, I was 100% T-Bills.
How'd you get started at 14? My youngest son got a summer job this past year, earned about $2K. I've spent a fair amount of time showing him how money and investment works. I told him I'd match what he put into a Roth IRA. The little bugger put in a full grand, so I matched it. He is 14 years old also. He is in AOA for now, probably for several years.
"An investment in knowledge pays the best interest" - Benjamin Franklin

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Re: Bogle says 50-50 short/intermediate bonds

Post by nedsaid » Fri Jan 13, 2017 12:06 pm

MickeyBoy wrote:I'm a bit confused.

Bond funds that have lost value owing to a higher interest rate will still generate the same returns as before. The only losses I see - perhaps I am missing something? - is if I sell the bonds, i.e. generating a loss in the principal. Newer bonds will have a higher interest rate, so in a sense I have lost in that to get that rate I have to sell older bonds at a loss.

Nedsaid: You are on to something. Bonds mature and they mature at their face value. So let's say you buy a 20 year bond with a coupon of 3% for $1,000. Let's also say that interest rates rise to 4% causing the value of the bond to decline to $900. The bond will still pay interest along the way and mature at the $1,000. Your market losses are not permanent.

The other mitigating factor is that in a bond fund, if you keep reinvesting the dividends, if you wait long enough, the rising interest rates will actually increase the returns of your fund. Time, patience, and reinvestment of dividends are the key. Vanguard has a white paper on this.


But apart for RMDs and current expenses, which we could prepare for with ST bonds, what is the problem with the remaining bond holdings? If their duration is about 4-6 years, the situation should right itself fairly quickly. I believe Morningstar says that the interval required to regain stability is shorter than the amount of time predicted by duration.
A fool and his money are good for business.

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Re: Bogle says 50-50 short/intermediate bonds

Post by pascalwager » Fri Jan 13, 2017 4:19 pm

Portfolio7 wrote:
pascalwager wrote:
galeno wrote:@pascalwager

That' a very large slug of cash. Why so much?
galeno,

Yes, I'm about 80/5/15, stocks/bonds/cash. I'm not much of a bonds guy and naturally gravitate towards a portfolio that's comprised of equity risk and ultra short-term risk (T-Bills, savings, I-Bonds). Because T-Bill rates are low, I mainly use a 1.05% savings account. If rates rise, I could go heavy into Treasuries. For most of my life, starting at age 14, I was 100% T-Bills.
How'd you get started at 14? My youngest son got a summer job this past year, earned about $2K. I've spent a fair amount of time showing him how money and investment works. I told him I'd match what he put into a Roth IRA. The little bugger put in a full grand, so I matched it. He is 14 years old also. He is in AOA for now, probably for several years.
Your son knows far more at 14 than I did at 52. But my father encouraged me to be a saver and I somehow learned about T-Bills. (He gave me a symbolic dollar bill every January 1st and told me he wanted me to still have it, or better, the following year.) Actually, I'm a natural saver, and tend to delay spending.

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Re: Bogle says 50-50 short/intermediate bonds

Post by pascalwager » Fri Jan 13, 2017 4:21 pm

stemikger wrote:I just stick with the Total Bond Market Index and hope for the best. So far it has done what it is supposed to do for me. Also, Vanguard still has faith in this fund because it is used in all their Target Date Funds, Lifestyle Funds and the Balanced Index mimics it.

John Bogle has often said the average person will do just fine with one fund which is the Vanguard Balanced Index Fund. Every year he puts money for his Grandchildren in this fund. If it's good enough for them, it's good enough for me.

One last thing, John Bogle has a net worth of $80 million. At this point he could put his money under his mattress. Most of us can not, or at least I can't. lol

https://www.google.com/?gws_rd=ssl#q=jo ... +net+worth
But the need for mattress diversification would apply, perhaps using extended family.

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Re: Bogle says 50-50 short/intermediate bonds

Post by nedsaid » Sat Jan 14, 2017 1:30 pm

pascalwager wrote:
stemikger wrote:I just stick with the Total Bond Market Index and hope for the best. So far it has done what it is supposed to do for me. Also, Vanguard still has faith in this fund because it is used in all their Target Date Funds, Lifestyle Funds and the Balanced Index mimics it.

John Bogle has often said the average person will do just fine with one fund which is the Vanguard Balanced Index Fund. Every year he puts money for his Grandchildren in this fund. If it's good enough for them, it's good enough for me.

One last thing, John Bogle has a net worth of $80 million. At this point he could put his money under his mattress. Most of us can not, or at least I can't. lol

https://www.google.com/?gws_rd=ssl#q=jo ... +net+worth
But the need for mattress diversification would apply, perhaps using extended family.
I think Nisiprius Investments has just that solution, the "Money Under the Mattress" fund, where it is stashed under mattresses all over the country. They can do that for a cool 1% a year.
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Re: Bogle says 50-50 short/intermediate bonds

Post by Dandy » Sat Jan 14, 2017 1:54 pm

Another market timing move by Jack - oh I mean tactical allocation move since when Jack does it there aren't a lot of warnings that he should stay the course. :happy

Tactical allocation occasionally makes some sense, especially on the fixed income side. e.g. last year a 10 year CD was 100 basis points higher than a 10 year Treasury - for some - the 10 year CD might have been better. Online Savings are paying 1%+ in some cases which might be better than a short term bond fund? If so, it might be better for some. Not saying you should chase yields and incur a lot of effort but it is ok to keep an eye and mind open.

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Re: Bogle says 50-50 short/intermediate bonds

Post by Nowizard » Sat Jan 14, 2017 1:56 pm

Indexfan: That is our approach with a recent 5% allocation to Short Term Corporate Index as a hedge.

Tim

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Re: Bogle says 50-50 short/intermediate bonds

Post by snowman9000 » Sat Jan 14, 2017 2:03 pm

Holding a bond fund in a rising rate environment is a lot different than holding bonds. Yes, you can simply hang onto your bonds until maturity. You never mark to market. You are replacing the unrealized capital losses with purchasing power losses, but it feels okay to most people anyway.

That is not how a bond fund operates. A long term bond fund must hold long term bonds. They sell bonds when they are no longer long term, and buy long term replacements. That's how you get realized capital losses. Plus, they mark to market every day, so the holders know they are losing.

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Re: Bogle says 50-50 short/intermediate bonds

Post by stlutz » Sat Jan 14, 2017 2:20 pm

Holding a bond fund in a rising rate environment is a lot different than holding bonds. Yes, you can simply hang onto your bonds until maturity. You never mark to market. You are replacing the unrealized capital losses with purchasing power losses, but it feels okay to most people anyway.

That is not how a bond fund operates. A long term bond fund must hold long term bonds. They sell bonds when they are no longer long term, and buy long term replacements. That's how you get realized capital losses. Plus, they mark to market every day, so the holders know they are losing.
No. Holding a bond fund is exactly the same thing as holding a bunch of individual bonds. If you buy a bunch of long-term bonds and sell them when they are no longer long-term bonds, you're running your own long-term bond fund. If you buy a bunch of short-term bonds and hold until maturity, you're running your own short-term bond fund. If you buy a bunch of bonds of varying maturities and credit qualities and hold until maturity, you're running a total bond market fund.

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Re: Bogle says 50-50 short/intermediate bonds

Post by Munir » Sat Jan 14, 2017 3:00 pm

Does anyone know what rationale Jack Bogle gave for holding a 50:50 portfolio of short and intermediate bond funds (a recommendation that I agree with)? I cannot find a transcript or video of his conversation that deal with those specific comments.The available documentation only deals with his comments regarding the Trump economy.

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Re: Bogle says 50-50 short/intermediate bonds

Post by dbr » Sat Jan 14, 2017 3:19 pm

Munir wrote:Does anyone know what rationale Jack Bogle gave for holding a 50:50 portfolio of short and intermediate bond funds (a recommendation that I agree with)? I cannot find a transcript or video of his conversation that deal with those specific comments.The available documentation only deals with his comments regarding the Trump economy.
Well, if the original statement was that long bond prices are too volatile that kind of leaves some arbitrary selection across short and intermediate as the alternative, absent any finer analysis. I would guess this is another example of taking one thing, a comment about long bonds being risky, and turning it into a presumed recommendation that everyone should be exactly 50/50 in short and intermediate bonds. I think Mr. Bogle likes to give specific examples to illustrate his meaning, which are all too often taken as instructions for what people had better do. I doubt what Mr. Bogle himself actually does makes that any more of a commandment.

PS That long bonds are riskier than shorter bonds is hardly news, and it would be a pretty uniform opinion here that bonds are best held not at long durations. That hardly rises to a 50/50 specification as mooted.

sambb
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Re: Bogle says 50-50 short/intermediate bonds

Post by sambb » Sat Jan 14, 2017 3:28 pm

Given the response against long term bonds , now might be the time to buy them. For years I've read here that Lt bonds are not good because we are at historic lows in interest rates. I wonder how the 5 years returns compare.

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Re: Bogle says 50-50 short/intermediate bonds

Post by pascalwager » Sat Jan 14, 2017 9:52 pm

Munir wrote:Does anyone know what rationale Jack Bogle gave for holding a 50:50 portfolio of short and intermediate bond funds (a recommendation that I agree with)? I cannot find a transcript or video of his conversation that deal with those specific comments.The available documentation only deals with his comments regarding the Trump economy.
For a retiree, 5 1/2 years duration is a long time. 50/50 brings it down to 4 years and 50/50 is easier to rebalance than another ratio, I guess. Also it's a little bit of personal market timing if he considers rates likely to gradually rise. A few years ago he was advising 2/3 IT and 1/3 ST, when rate increases were a little less imminent.

He seems to take term risk more seriously than most BHs.

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Re: Bogle says 50-50 short/intermediate bonds

Post by pascalwager » Sun Jan 15, 2017 12:50 am

nedsaid wrote:
pascalwager wrote:
stemikger wrote:I just stick with the Total Bond Market Index and hope for the best. So far it has done what it is supposed to do for me. Also, Vanguard still has faith in this fund because it is used in all their Target Date Funds, Lifestyle Funds and the Balanced Index mimics it.

John Bogle has often said the average person will do just fine with one fund which is the Vanguard Balanced Index Fund. Every year he puts money for his Grandchildren in this fund. If it's good enough for them, it's good enough for me.

One last thing, John Bogle has a net worth of $80 million. At this point he could put his money under his mattress. Most of us can not, or at least I can't. lol

https://www.google.com/?gws_rd=ssl#q=jo ... +net+worth
But the need for mattress diversification would apply, perhaps using extended family.
I think Nisiprius Investments has just that solution, the "Money Under the Mattress" fund, where it is stashed under mattresses all over the country. They can do that for a cool 1% a year.
Yes, "all over the country" is the correct statement. He wouldn't condone using any international mattresses, or at least, no more than 20%.

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Re: Bogle says 50-50 short/intermediate bonds

Post by oldcomputerguy » Sun Jan 15, 2017 6:03 am

sambb wrote:Given the response against long term bonds , now might be the time to buy them.
A contrarian response. I love it.
:beer
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

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Re: Bogle says 50-50 short/intermediate bonds

Post by Dandy » Sun Jan 15, 2017 8:01 am

little bit of personal market timing


While the words "little bit" and "personal" and even "tactical" tend to soften it -- it is market timing and not staying the course. I'm not criticizing it -- just saying people can and probably should, on occasion, make changes to their portfolio. Market timing can be a significant problem but not every action to adjust a portfolio to changing conditions is a bad thing. At least Bogle feels than way.

I'm sure Mr. Bogle isn't reacting to media hype or losing sleep due to panic about his portfolio. He is probably calmly looking at objective data and the Fed intentions, etc. and making a calculated move to adjust his portfolio with a bent toward making it less risky. A model for some, especially in retirement.

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Re: Bogle says 50-50 short/intermediate bonds

Post by beyou » Sun Jan 15, 2017 10:20 am

For diversification, good to own some LT bonds.
In times of deflation, you'll be glad you do.
Good to own some tips or st bonds for inflation.
I try to rebalance between the two, similar to stock/bond rebalancing.

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Re: Bogle says 50-50 short/intermediate bonds

Post by nedsaid » Sun Jan 15, 2017 10:32 am

sambb wrote:Given the response against long term bonds , now might be the time to buy them. For years I've read here that Lt bonds are not good because we are at historic lows in interest rates. I wonder how the 5 years returns compare.
If you believe that we are more likely to experience deflation rather than inflation, long term bonds would be a smart move. We had a monster bond bull market from 1982 to late 2016. I think maybe it ended in 2013 with the taper tantrum but it is hard to say. Rates seem to rise and then fall again. We seem to be in a tug of war now, back and forth. Trends and bull markets just don't last forever, after almost 35 years it is hard to believe that interest rates will just keep falling and falling.
A fool and his money are good for business.

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Re: Bogle says 50-50 short/intermediate bonds

Post by patrick013 » Sun Jan 15, 2017 2:19 pm

nedsaid wrote:
sambb wrote:Given the response against long term bonds , now might be the time to buy them. For years I've read here that Lt bonds are not good because we are at historic lows in interest rates. I wonder how the 5 years returns compare.
If you believe that we are more likely to experience deflation rather than inflation, long term bonds would be a smart move. We had a monster bond bull market from 1982 to late 2016. I think maybe it ended in 2013 with the taper tantrum but it is hard to say. Rates seem to rise and then fall again. We seem to be in a tug of war now, back and forth. Trends and bull markets just don't last forever, after almost 35 years it is hard to believe that interest rates will just keep falling and falling.
I think it's a good guess the FFR will rise .50 % this year. So, the interest tree
will rise given time and high and low spreads for everything will be established.
The soft landing will have higher rates rather than abrupt changes. I think ST
is good at least for liquidity without selling at a capital loss. The 10 year TRSY
should yield over 3 % and a YTM calculator can provide a new market price for
those bonds or notes.
age in bonds, buy-and-hold, 10 year business cycle

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